Pearson Edexcel · A-Level · Economics B
Course version: 9EB0 · Version from Sept 2015
B) Market-based and interventionist policies to: o increase incentives o…
Full specification wording
Supply-side policies: b) Market-based and interventionist policies to: o increase incentives o promote competition o reform the labour market o improve the skills and quality of the labour force o improve the infrastructure
Governments use market-based and interventionist policies to achieve supply-side goals.
Checked against the Pearson Edexcel 9EB0 specification (opens in a new tab) on .
- Point 2 of 3
- 4 key terms
Study notes
From the checked teaching notes for this specification point.
The idea
Governments use market-based and interventionist policies to achieve supply-side goals. To increase incentives, market-based policies cut income tax, while interventionist policies offer targeted grants. Promoting competition involves market-based deregulation. Reforming the labour market includes reducing trade union power (market-based) or subsidising worker relocation (interventionist). Improving the skills and quality of the labour force typically requires interventionist state education funding, alongside market-based private training incentives. Finally, improving infrastructure usually relies on interventionist public spending, but can utilise market-based private finance initiatives to build new transport or communication networks.
What earns the marks
- Explain how cutting income tax or corporation tax increases incentives for workers and firms.
- Describe how deregulation and privatisation promote competition by removing barriers to entry.
- Identify reducing trade union power and altering unemployment benefits as methods to reform the labour market.
- Explain that government spending on education and training improves the skills and quality of the labour force.
- Detail how direct government investment or private finance initiatives improve physical and digital infrastructure.
Common mistakes and how to put them right
Stating that a minimum wage is a market-based labour market reform.
Put it right: A minimum wage is an interventionist policy; market-based reforms typically involve removing such regulations to increase wage flexibility.
Confusing infrastructure spending with short-term demand management.
Put it right: While infrastructure spending boosts aggregate demand in the short run, its primary supply-side goal is to increase long-run productive potential.
Assuming all education policies are interventionist.
Put it right: While state funding is interventionist, policies encouraging private sector training or private schooling have market-based elements.
Exam tips
- Link specific policies directly to their intended outcome, such as explaining exactly how deregulation promotes competition.
- Evaluate the effectiveness of these policies by considering their cost to the government and the time it takes for them to take effect.
- Contrast a market-based policy with an interventionist policy when discussing how to achieve a specific goal like labour market reform.
Try the lesson
The start of the Supply-side policies: b) Market-based and interventionist policies to: o increase incentives o promote competition o reform the labour market o improve the skills and quality of the labour force o improve the infrastructure lesson, made from checked teaching notes for this specification point.
Have a go first
Which of the following is an example of an interventionist supply-side policy designed to improve the infrastructure?
Listen
Governments use market-based and interventionist policies to achieve supply-side goals. To increase incentives, market-based policies cut income tax, while interventionist policies offer targeted grants. Promoting competition involves market-based deregulation. Reforming the labour market includes reducing trade union power (market-based) or subsidising worker relocation (interventionist). Improving the skills and quality of the labour force typically requires interventionist state education funding, alongside market-based private training incentives. Finally, improving infrastructure usually relies on interventionist public spending, but can utilise market-based private finance initiatives to build new transport or communication networks. A strong answer earns marks for these points. Explain how cutting income tax or corporation tax increases incentives for workers and firms. Describe how deregulation and privatisation promote competition by removing barriers to entry. Identify reducing trade union power and altering unemployment benefits as methods to reform the labour market. Explain that government spending on education and training improves the skills and quality of the labour force. A common slip: Stating that a minimum wage is a market-based labour market reform. Instead, A minimum wage is an interventionist policy; market-based reforms typically involve removing such regulations to increase wage flexibility. Exam tip: Link specific policies directly to their intended outcome, such as explaining exactly how deregulation promotes competition.
Key words
Say what each word means before you turn the card.
Labour market flexibility
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Human capital
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Infrastructure investment
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Economic incentives
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See every definition
- Labour market flexibility
- Reforming the labour market can involve reducing trade union power or altering unemployment benefits, with market-based reforms typically removing regulations such as a minimum wage to increase wage flexibility.
- Human capital
- The skills and quality of the labour force can be improved through government spending on education and training, or through policies encouraging private sector training.
- Infrastructure investment
- Improving infrastructure usually relies on interventionist public spending, but can utilise market-based private finance initiatives to build new transport or communication networks.
- Economic incentives
- Cutting income tax or corporation tax increases incentives for workers and firms, while interventionist policies offer targeted grants.
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